I Got a Raise!

Asking for a raise at work is one of the most awkward money conversations you’ll have. It’s right up there with asking someone you’re dating if they have debt and talking to your parents about their retirement plans. But, if you want to increase your earning potential, you’ve got to bite the bullet and advocate for yourself.

Unfortunately, the company I work for was heading into its slow season, so there would be no raise, but my manager assured me that when things picked up, that would change.

He was right, and two weeks ago when I was in New Brunswick I got the exciting news that I was getting a raise. A big one. In fact, I got a 10% increase over my current salary.

Needless to say, I was super pumped. I love making more money, but without a raise, I’ve had work on the side to increase my income. Making more money without adding hours to my day is far more preferable.

How I’m Going to Save My Raise

For most people, a raise represents a chance to improve their life in some way.Maybe they’ll finally replace that aging car with a shiny new, financed vehicle.

Maybe they’ll use the money to eat out one extra night a week, or go shopping more often.

Most people use raises to inflate their current standard of living in some way. That’s called lifestyle inflation, and it’s a savvy saver’s worst enemy.

To be honest, I did briefly consider the things I could do with the extra cash flow my raise provides. I could move into a better apartment, one that doesn’t have pigeons lurking above my door or three flights of stairs to carry my bike up. I could finally afford a new couch and television that my husband and I have been wanting for almost three years. The possibilities for lifestyle inflation are almost endless.

But then I looked around at my life, and you know what? I’m happy. In fact, I’m the most content with my life that I’ve been in a long time, and spending a little more money isn’t going to make a big difference.

So instead, I’m avoiding lifestyle inflation and saving my raise. Here’s where the money is going.

Boosting Retirement Contributions

Every month since November 2013, I have put $500 into my RRSP for retirement, for a total of $6,000 per year. I’m invested in Tangerine Investment Funds, which are low-cost index funds. Based on my conservative retirement projections, my $6,000 per year should net me a bit over a million by the time I’m ready to retire. That would be an ok amount of money to retire on, but I’d rather retire with a lot of money, instead of a little.

So I’m adding $50 per month to my contributions, for a total of $6,600 per year. That will add about $100,000 to my bottom line at retirement age. I plan on boosting this contribution more after I buy a home, but for now, I’m content with this amount.

Padding My Car Fund

Ok, so I am going to spend a little of this raise, but it’s not going to consumption of useless goods. First, my car gas and maintenance fund is a little low. With the trips back and forth to New Brunswick costing a pretty penny in fuel and a few unexpected repairs, I’ve been scraping the bottom of this fund for awhile. I also know that my car’s tires will need to be replaced soon, so I need to budget for that. I’ve siphoned off a little from my raise to help get this fund back onto solid footing.

Boosting My House Down Payment

The rest of my raise is going towards my house down payment. I’m now going save $760 per month directly from my budgeted income, not including freelance or extra paycheques. This is good news because after I found out how small my tax return would be, I wasn’t sure if I could make my goal of saving $35,000 by the end of the year. This new raise makes up for my underwhelming income tax return and keeps this goal in reach.

I’m Now Saving 35% of My Income

Finally, the best part of this raise is that the proportions of my budget look much better.

I’m spending around 33% on housing (down from 35%), saving 35% (up from 33%) and spending less than 6% on transportation.

I’m always looking for ways to boost my savings rate and decrease my expenses as a proportion of my overall income, so this raise shifted my budget in a positive way.

I’m super happy that I received a raise and I can’t wait to start seeing the positive effects it will have on my finances!

I’ve never gotten a raise at any of my jobs, other then the small cost of living increases or those that were outlined by the union contract – only an extra 50 cents or so an hour. Certainly nothing like 10% more!
Good for you for asking for the raise in the first place, and for being smart about where this money is going. 🙂

I LOVE to hear other PF people share their plans because it’s always so well thought out. I switched jobs last year, for a couple of reasons, one of which was to earn more money. While netting only $110 more per paycheque (plus a cell phone was now no longer covered), I questioned whether or not I’d really gotten ahead. I did some math and added an extra $500 to pension savings and am netting an extra $1800 a year to pay off debt. It wasn’t huge at the end of the day, but I took comfort in improving. Now, in the same job, I’ll take another raise in early May and I’m way too excited to plan for the best way to utilize it!

It’s funny how what seems like a big raise only ends up being a hundred extra bucks per paycheque eh? This exact thing happened to me! Once I figured out how much I’d actually net, I wasn’t adding gigantic sums to any of my savings, but its definitely a step in the right direction!

Cat Alford/ Budget Blonde

Congrats on your raise! I’m glad to hear that you will be using it wisely for savings and investments.

When I worked for the government we got raises ever year, but they were really small, something around 2%. With my current job, I initially took a significant pay cut, but received 3 raises. The first one was small and I didn’t ask for it. The 2nd one I asked for, and over 15 % more and the 3rd one I received was over 20% (didn’t ask for it). It’s so nice to work for a company that recognizes the amount of effort I put in the work I do.

Like you, I will definitely avoid lifestyle inflation. With the increase, I will look into increasing my RRSP and TFSA contributions, adding more to my Iceland vacation fund and increasing our monthly mortgage payment.

I'm a part time runner, yogi, local foodie and personal finance aficionado. I blog about handling money as a debt ridden millennial. [read more]

My Money Facts

Starting Debt: $37,987.65Current Debt: $0.00
I paid off my original debt in just 24 months.